As the need for U.S. federal government engagement on climate change becomes more pressing, various leaders and agencies are stepping into the void. This week, the U.S. Government Accountability Office, a legislative branch government agency that provides evaluation and investigation services for the U.S. Congress, issued a report critical of the U.S. Department of Defense’s practice of basing responses to extreme weather events and climate change effects based on past experience and called on the Secretary of Defense to issue guidance on “incorporating climate projections into installation master planning” as well as facility project designs. The guidance should cover how to integrate multiple future scenarios, what scientific projections to use, and what future time frames to consider, the GAO suggested.
Recently, the Council on Foreign Relations program on Energy Security and Climate Change convened a workshop on related issues. The program entitled “Climate Risks to the Energy System: Examining the Financial, Security, and Technological Dimensions” concluded that U.S. energy infrastructure is increasingly at risk to climactic changes and that the United States is ill prepared to address those risks, which are a serious matter of national security. In the report from the CFR workshop it was recommended that Congress require the Department of Homeland Security and the Federal Emergency Management Agency (FEMA) to update risk assessments to include detailed analysis by geography, infrastructure type, and detail of potential specific climate hazards to better identify future climate-related vulnerabilities. This is important for the U.S. energy system generally and to energy supplies to U.S. military bases and operations specifically. Such regional and local assessments should be shared with the U.S. Army Corps of Engineers and FEMA as a basis for planning capital expenditures for adaptation and evacuation.
The release of the GAO report release came around the same time as hearings at the U.S. Commodity Futures Trading Commission (CFTC) on June 12 where Rostin Behnam, a CFTC regulator, told the New York Times that “It’s abundantly clear that climate change poses financial risk to the stability of the financial system.” Behnam’s comments echo similar concerns raised recently by the Bank of Canada and the European Central Bank. Democratic Presidential candidates are also joining the mix. Washington Governor Jay Inslee has made climate change his signature issue. Former Vice President Joe Biden has also publicly put forward a climate change plan and responded positively to calls for a Democratic televised debate on the topic.
Climate change affects virtually every aspect of the U.S. energy system. U.S. infrastructure for electricity, fuel, and information are highly interdependent, meaning that a failure in one part of the system can have cascading effects on other critical parts of the U.S. economy. Climatic disruptions to domestic energy supply could be large, entailing huge economic losses and potentially requiring sizable military mobilizations. California faces particularly difficult questions about how to resolve the bankruptcy of its major electric utility PG&E whose faulty equipment caused several costly wildfires last year and has raised the possibility of market failure in local private insurance markets. Texas is debating a multibillion dollar publicly funded program to build a seawall to protect its storm-vulnerable coastal refineries responsible for about 27 percent of U.S. military grade jet fuel and 13 percent of the nation’s gasoline production.
CFR workshop participants expressed concern that the U.S. Security and Exchange Commission (SEC) is not doing an adequate job ensuring that disclosure of material risks related to climate change are accurate and sufficiently detailed. This year, the SEC received an active slate of shareholder proposals related to climate change but so far has dragged its feet on initiating any new disclosure guidelines on the subject. The SEC needs to establish permanent disclosure standards for climate change related risks to publicly-traded energy companies and utilities, the CFR workshop concluded. To explore best practices towards possible improved disclosure rules, workshop participants recommended that the SEC participate actively in fact finding forums to gather feedback from institutional investors, energy firms, financial analysts, and other relevant market participants.